<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________________ to ____________________
Commission file number 1-4802
--------------
Becton, Dickinson and Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Becton Drive Franklin Lakes, New Jersey 07417-1880
---------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(201)847-6800
---------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
---------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No .
- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Shares Outstanding as of April 30, 1996
--------------------- ---------------------------------------
Common stock, par value $1.00 63,009,636
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
---------------------
Condensed Consolidated Balance Sheets at March 31, 1996 and September 30,
1995
Condensed Consolidated Statements of Income for the three and six month
periods ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the six months ended
March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
<TABLE>
<CAPTION>
March 31, September 30,
Assets 1996 1995
- ------ ----------- -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 156,644 $ 198,506
Short-term investments 36,930 41,495
Trade receivables, net 552,041 573,093
Inventories (Note 2):
Materials 86,437 87,116
Work in process 67,342 71,316
Finished products 240,593 250,203
---------- ----------
394,372 408,635
Prepaid expenses, deferred taxes and other 111,185 105,789
---------- ----------
Total Current Assets 1,251,172 1,327,518
Investments in Marketable Securities 44,400 44,400
Property, plant and equipment 2,411,609 2,423,080
Less allowances for depreciation and amortization 1,179,457 1,142,049
---------- ----------
1,232,152 1,281,031
Intangibles, Net
Patents and other 79,563 84,403
Goodwill 98,009 97,098
Other 157,513 165,055
---------- ----------
Total Assets $2,862,809 $2,999,505
========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 262,556 $ 205,799
Payables and accrued expenses 452,248 514,236
---------- ----------
Total Current Liabilities 714,804 720,035
Long-Term Debt 487,952 557,594
Long-Term Employee Benefit Obligations 299,233 289,711
Deferred Income Taxes and Other 38,868 33,780
Commitments and Contingencies - -
Shareholders' Equity:
Preferred stock 53,860 54,713
Common stock 85,349 85,349
Capital in excess of par value 127,628 118,201
Cumulative currency translation adjustments (17,457) 6,767
Retained earnings 2,035,168 1,946,636
Unearned ESOP compensation (36,694) (36,941)
Shares in treasury - at cost (925,902) (776,340)
---------- ----------
Total Shareholders' Equity 1,321,952 1,398,385
---------- ----------
Total Liabilities and Shareholders' Equity $2,862,809 $2,999,505
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per Share Data
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------- -----------------------
1996 1995 1996 1995
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $705,725 $692,839 $1,345,660 $1,286,315
Cost of products sold 368,709 370,237 717,455 697,302
Selling and administrative 185,901 180,898 367,810 352,504
Research and development 38,323 35,504 75,657 70,727
-------- -------- ---------- ----------
TOTAL OPERATING COSTS AND EXPENSES 592,933 586,639 1,160,922 1,120,533
-------- -------- ---------- ----------
OPERATING INCOME 112,792 106,200 184,738 165,782
Interest expense, net (9,698) (11,571) (18,985) (22,125)
Other income (expense), net 781 (2,404) (42) (3,786)
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 103,875 92,225 165,711 139,871
Income tax provision 29,085 27,296 46,399 41,398
-------- -------- ---------- ----------
NET INCOME $ 74,790 $ 64,929 $ 119,312 $ 98,473
======== ======== ========== ==========
EARNINGS PER SHARE $ 1.10 $ .92 $ 1.75 $ 1.38
======== ======== ========== ==========
DIVIDENDS PER SHARE $ .23 $ .205 $ .46 $ .41
======== ======== ========== ==========
Average common and common
equivalent shares outstanding 67,323 69,243 67,267 69,797
======== ======== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------
1996 1995
--------- ---------
Operating Activities:
<S> <C> <C>
Net income $ 119,312 $ 98,473
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 101,811 101,856
Change in working capital (55,483) (27,829)
Other, net 13,580 8,133
--------- ---------
Net cash provided by operating activities 179,220 180,633
--------- ---------
Investing Activities:
Capital expenditures (61,530) (50,103)
Acquisitions of businesses (13,543) (1,829)
Proceeds from divestitures of businesses 29,667 2,000
Payment received on note receivable - 23,836
Change in investments, net 4,615 (9,675)
Other, net 2,233 (12,654)
--------- ---------
Net cash used for investing activities (38,558) (48,425)
--------- ---------
Financing Activities:
Change in short-term debt (7,043) (80,316)
Proceeds of long-term debt - 107,976
Payments of long-term debt (2,056) (19,033)
Issuance of common stock 18,964 8,879
Repurchase of common stock (159,952) (165,315)
Dividends paid (31,200) (29,512)
--------- ---------
Net cash used for financing activities (181,287) (177,321)
--------- ---------
Effect of exchange rate changes on cash and equivalents (1,237) (2,245)
--------- ---------
Net decrease in cash and equivalents (41,862) (47,358)
Opening Cash and Equivalents 198,506 94,913
--------- ---------
Closing Cash and Equivalents $ 156,644 $ 47,555
========= =========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
Note 1 - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However,
the financial statements do not include all information and footnotes required
for a presentation in accordance with generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's 1995 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
Note 2 - Inventory Valuation
- ----------------------------
An actual valuation of inventory under the LIFO method can be made only at the
end of each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs.
Note 3 - Sale of Contract Packaging Business
- --------------------------------------------
In February 1996, the Company consummated the sale of its contract packaging
business. The pre-tax gain of approximately $2 million recognized on this sale
is included in Other Income (Expense), Net.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------------
Results of Operations
- ---------------------
Second Quarter 1996 vs. Second Quarter 1995
- -------------------------------------------
Second quarter reported revenues of $706 million exceeded the prior year's
revenues by 2%. The favorable effect of a weaker dollar versus the prior year
added an estimated $6 million to revenues, or less than 1 percentage point.
Reported revenue growth was unfavorably impacted by the divestiture of the glove
business in the third quarter of 1995 and the divestitures of a contract
packaging business and a small surgical product line in the current quarter.
Adjusting for these divestitures, the revenue growth rate would have been
approximately 7%. Medical Supplies and Devices segment revenues of $379 million
decreased 2% due primarily to the impact of the divestitures noted above.
Diagnostic Systems segment revenues of $326 million increased 6%. The estimated
favorable impact of foreign currency translation on these segments was
approximately 1% in the Medical segment and less than 1% in the Diagnostic
segment.
Domestic Medical segment revenues of $194 million decreased 6% while
International Medical segment revenues of $185 million increased 3%, or
approximately 1% after excluding the estimated favorable impact of foreign
currency translation. Although good worldwide growth rates were experienced by
the injection systems and infusion therapy businesses, both of which continue to
benefit from the conversion to safety products, these results were more than
offset by the absence of revenues in the current quarter from the above
mentioned divestitures.
Domestic Diagnostic segment revenues of $170 million increased 2% and continue
to be unfavorably impacted by cost containment initiatives in the marketplace.
The Company is responding to these trends by continuing the effort to develop
innovative and cost effective products. International Diagnostic segment
revenues of $157 million increased 11%, or 10% after excluding the estimated
favorable effect of foreign currency translation. Strong sales growth continued
in the sample collection and flow cytometry businesses, particularly in Europe,
Japan and the Asia-Pacific region.
The gross profit margin of 47.8% was over one percentage point higher than last
year's second quarter rate of 46.6% and reflects continued productivity
improvements, a more profitable mix of products sold and favorable foreign
currency translation. Selling and administrative expense of $186 million was
26.3% of revenues, which was about the same as last year's ratio of 26.1%,
despite the increase in some targeted investments in sales and marketing for
critical strategic initiatives and international expansion. Investment of $38
million in research and development increased 8% over last year's second quarter
expenditures, reflecting the increased funding of strategic choices in the
Company's areas of focus.
The Company also recorded a $6 million charge to write off intangibles
associated with a small medical product line which the Company made the decision
to exit in the second quarter.
7
<PAGE>
Operating income of $113 million increased 6% from last year's second quarter
amount of $106 million. The improvement in the operating margin from 15.3% to
16.0% primarily reflects the improved gross profit margin. Excluding the effects
of the divestitures and the write-off noted above, growth in operating income
would have been approximately 16%.
Net interest expense of $10 million was $2 million lower than last year's second
quarter amount, reflecting the Company's strong cash flow and reduced working
capital requirements. Other income (expense), net was $3 million favorable to
last year's second quarter amount as a result of several offsetting items
including gains from asset sales largely offset by an adjustment of the carrying
value of certain real estate to reflect net realizable value. The second quarter
income tax rate was 28.0%, compared with last year's second quarter rate of
29.6%, reflecting the forecasted mix in income between tax jurisdictions.
Net income was $75 million compared with $65 million last year, an increase of
15%. Earnings per share of $1.10 increased 20% over last year's $.92. Strong
growth in operating income as well as the Company's continuation of the share
repurchase program contributed to this favorable earnings per share growth.
Six Months 1996 vs. Six Months 1995
- -----------------------------------
Reported revenues of $1.346 billion exceeded the prior year's level of $1.286
billion by 5%, or 3% after excluding the estimated favorable impact of foreign
currency translation. Reported revenue growth would have been approximately 7%
after adjusting for the negative impact of the divested businesses and the
favorable effect on revenues (primarily in the first quarter) from the reduction
in promotional activity in the fourth quarter of last year. Medical Supplies
and Devices segment revenues increased 3% to $726 million. Diagnostic Systems
segment revenues were $619 million, an increase of 7%. Despite the absence of
certain revenues in the current period as a result of the above mentioned
divestitures, domestic revenues increased by $2 million to $690 million over
last year's amount and international revenues of $655 million increased 10%, or
7% after excluding the estimated favorable impact of foreign currency
translation.
The gross profit margin of 46.7% was almost one percentage point higher than
last year's rate of 45.8%. Selling and administrative expense was 27.3% of
revenues, slightly better than last year's rate of 27.4%. Investment of $76
million in research and development expense was 7% higher than last year's
investment. As a percent of revenues, research and development expense was
5.6%, slightly higher than last year's rate of 5.5%. The reasons for these
changes are consistent with those previously discussed in the Second Quarter
Results of Operations.
Operating income of $185 million increased $19 million over last year. As a
percent of revenues, operating income was 13.7% compared with last year's 12.9%,
resulting primarily from increased margins and spending controls.
Other expense, net was $4 million favorable compared to last year. The reasons
for this change are consistent with those previously discussed in the Second
Quarter Results of Operations.
The income tax rate of 28.0%, compared to last year's rate of 29.6%, reflects a
more favorable forecasted mix in income between tax jurisdictions.
8
<PAGE>
Net income was $119 million, compared with $98 million last year, an increase of
21%. Earnings per share of $1.75 increased 27% over last year's $1.38, or 22%
after excluding the estimated $.06 favorable impact of foreign currency
translation compared with the prior year.
Financial Condition
- -------------------
During the first six months of 1996, cash provided by operations was $179
million, essentially unchanged from the $181 million provided during the first
six months of last year. In the first six months of 1996, net working capital
decreased $71 million reflecting the emphasis on asset management at the
operating unit level. Total debt decreased $13 million during the first six
months of 1996. The percentage of debt to capitalization (wherein
capitalization is defined as the sum of shareholders' equity, net non-current
deferred income tax liabilities, and debt) was 36.0%, significantly lower than
38.0% a year ago. In March 1996, the Company announced that it had elected to
redeem on June 1, 1996 $66.4 million principal amount of its outstanding 9 1/4%
Sinking Fund Debentures due June 1, 2016 at a price of 104.375% of the principal
amount.
Capital expenditures for the first six months were $62 million compared with $50
million during the first six months of last year. For the full year, capital
expenditures are expected to be approximately $150 million. In the first six
months, the Company also expended $14 million to complete acquisitions primarily
in the infectious disease and sample collection businesses and collected
approximately $30 million related to divestitures of the contract packaging
business and a small surgical product line.
Because of its strong credit ratings, the Company believes it has the capacity
to arrange significant additional borrowings should the need arise.
During the first six months of 1996, the Company repurchased 2.1 million shares
of its common stock for a total expenditure of $160 million. At March 31, 1996,
authorization from the Board of Directors remained outstanding to acquire an
additional 1.9 million shares. For the full year, the Company expects to spend
approximately $300 million for share repurchases.
At its January 1996 meeting, the Board of Directors increased the Company's
quarterly dividend to $.23 from the $.205 per common share declared in the
second quarter of 1995. This dividend was paid on March 29, 1996.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". This Statement establishes accounting standards for
the assessment and measurement of impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. Although the Company is assessing the effect of adoption of
Statement No. 121, which is required to be adopted by the Company by the first
quarter of fiscal 1997, its adoption is not expected to have a material impact
on the Company's results of operations or financial condition.
9
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
a.) The Annual Meeting of Shareholders of the Company was held on
February 13, 1996.
c.) i.) A management proposal for the election of three directors for
the terms indicated below was voted upon as follows:
Nominee Term Votes For Votes Withheld
------------------- --------- ----------- ----------------
James E. Perrella 3 Years 56,431,184 807,083
Gloria M. Shatto 3 Years 56,445,079 793,188
Raymond S. Troubh 3 Years 56,422,400 815,867
ii.) A management proposal to ratify the selection of Ernst & Young
LLP as independent auditors for the fiscal year 1996 was voted
upon. 57,008,715 shares were voted for the proposal, 95,652
shares were voted against and 133,900 shares abstained.
iii.) A shareholder proposal to recommend that the Company disclose
information concerning senior executives with the corporation
who have previously served in a governmental capacity was
voted upon. 2,252,224 shares were voted for the proposal,
48,623,198 shares were voted against and 2,550,624 shares
abstained.
iv.) A shareholder proposal to recommend the disclosure of a
comprehensive report on the Company's Mexican operations was
voted upon. 4,541,908 shares were voted for the proposal,
43,651,019 shares were voted against and 5,233,119 shares
abstained.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
11 - Computation of Earnings Per Share.
27 - Financial Data Schedule
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended
March 31, 1996.
11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Becton, Dickinson and Company
------------------------------
(Registrant)
Date May 13, 1996
--------------
/s/ Edward J. Ludwig
-----------------------------
Edward J. Ludwig
Senior Vice President - Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
12
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of
Number Description Filing
- ------- ----------- ---------
11 Computation of Earnings Filed with
Per Share this report
27 Financial Data Schedule Filed with
this report
13
<PAGE>
BECTON, DICKINSON AND COMPANY Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(All amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
------------------
PRIMARY EARNINGS PER SHARE 1996 1995
- -------------------------- -------- -------
<S> <C> <C>
Net income $119,312 $98,473
Less preferred stock dividends (1,759) (1,812)
-------- -------
Net income applicable to common stock $117,553 $96,661
======== =======
Shares:
Average shares outstanding 64,194 67,938
Add dilutive stock equivalents from stock plans 3,073 1,859
-------- -------
Weighted average number of common and common
equivalent shares outstanding during the year 67,267 69,797
======== =======
Earnings per share $ 1.75 $ 1.38
======== =======
<CAPTION>
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------
<S> <C> <C>
Net income applicable to common stock $117,553 $96,661
Add preferred stock dividends
using the "if converted" method 1,759 1,812
Less additional ESOP contribution, using
the "if converted" method (651) (716)
-------- -------
Net income for fully diluted earnings per share $118,661 $97,757
======== =======
Shares:
Average shares outstanding 64,194 67,938
Add:
Dilutive stock equivalents from stock plans 3,296 2,169
Shares issuable upon conversion
of preferred stock 1,461 1,506
-------- -------
Weighted average number of common shares used
in calculating fully diluted earnings per share 68,951 71,613
======== =======
Fully diluted earnings per share $ 1.72 $ 1.37
======== =======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Consolidated Financial Statements for the six months
ended March 31, 1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 156,644
<SECURITIES> 36,930
<RECEIVABLES> 552,041
<ALLOWANCES> 0 <F1>
<INVENTORY> 394,372
<CURRENT-ASSETS> 1,251,172
<PP&E> 2,411,609
<DEPRECIATION> 1,179,457
<TOTAL-ASSETS> 2,862,809
<CURRENT-LIABILITIES> 714,804
<BONDS> 487,952
<COMMON> 85,349
0
53,860
<OTHER-SE> 1,182,743
<TOTAL-LIABILITY-AND-EQUITY> 2,862,809
<SALES> 1,345,660
<TOTAL-REVENUES> 1,345,660
<CGS> 717,455
<TOTAL-COSTS> 717,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0 <F1>
<INTEREST-EXPENSE> 27,434
<INCOME-PRETAX> 165,711
<INCOME-TAX> 46,399
<INCOME-CONTINUING> 119,312
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 119,312
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.72
<FN>
<F1> These items are consolidated only at year-end.
</FN>
</TABLE>
